This week, the House Ways and Means Subcommittee on Health held a hearing on proposals to reform Medicare at which critical issues facing the Medicare program and current and future beneficiaries were discussed. The Center for Medicare Advocacy, together with California Health Advocates and the Medicare Rights Center, submitted joint testimony to the Committee outlining concerns for beneficiaries and their families regarding certain proposals aimed primarily at achieving federal savings. These proposals seek to save the government money by shifting costs to beneficiaries.

Among these proposals are three found in the President's budget and in other proposals: adding a co-pay to Medicare's Home Health benefit; increasing the annual Part B deductible; and further income-relating premiums for Part B and Part D. The joint Testimony made the following points regarding these proposals:

Adding a Copay to the Home Health Benefit

Several Medicare reform proposals include adding cost-sharing to the Medicare home health benefit, which is not currently subject to beneficiary cost-sharing. Imposing such co-pays would have a staggering impact on individuals with long-term and chronic conditions, who would incur hundreds of dollars in new out-of-pocket costs annually. Additionally, adding copayments to the home health benefit would likely lead to higher hospitalizations (and thus higher costs) as a result of beneficiaries forgoing needed care when they cannot afford the co-payments.[1]

Some proposals to add cost-sharing to the Medicare home health benefit would implement co-pays for only those who receive home health care that is not preceded by a hospital or nursing home stay. While this limitation might seem like an attempt to mitigate the harm of home health copays, instead it would create a perverse incentive toward hospitalization or nursing home care, and would harm people with long-term or chronic conditions. In our experience serving Medicare beneficiaries, we find that many home health agencies are already reluctant to take on patients who need home health for the long term. Segmenting the home health population by charging co-pays to those who are more likely to need care for chronic conditions, and not those who have short-term post-acute needs, will significantly exacerbate this problem.

In short, we are opposed to imposing home health copays. The Congressional Budget Office estimates that this home health copay would save only $730 million over ten years. This minor savings simply does not justify the great harm it would cause to vulnerable older, disabled people, and their families.

We also oppose efforts to cap Medicare payment based upon episodes of care, either by individual beneficiary or by an individual home health agency's aggregate episodes of care, which would effectively limit the duration of time individuals could access home health services.[2]

Increasing the Annual Part B Deductible

Several proposals include provisions that would either increase the Medicare Part B deductible alone or in combination with altering the Part A deductible.[3] Combining the A and B deductible by effectively increasing the Part B deductible ($147 in 2013) and lowering the Part A deductible ($1,184 in 2013) to form a combined deductible somewhere in between these figures would arguably have some benefit for the relatively small number of Medicare beneficiaries who use inpatient services.[4] Merely increasing the Part B deductible for everyone without lowering any other expenses, however, simply amounts to an unwarranted shift of additional costs to Medicare beneficiaries. In addition, proposals to phase in increases incrementally would increase Medicare's complexity by drawing an arbitrary line between current beneficiaries and near retirees who would be unaffected and those who will join Medicare in the future and will permanently pay more.

Even more worrisome, however, is the impact that an increased deductible would likely have on Medicare beneficiaries, particularly those who are lower income and unable to afford additional health costs. Additional upfront costs in the form of a higher deductible would lead to self-rationing of care as many individuals would postpone needed care which, in turn, could result in increased costs when an untreated illness becomes more complicated and more costly to treat.

Further Income-Relating ("Means Testing") Premiums for Parts B and D

Today, income-related premiums affect roughly 5% of Medicare beneficiaries.[5] Medicare beneficiaries with incomes above $85,000 ($170,000 for a couple) already pay higher Part B premiums pursuant to the Medicare Modernization Act of 2003. In 2011, the Affordable Care Act added income-related Part D premiums and froze the income limits through 2019 so that each year more people will be subject to higher premiums for Parts B and D.

By 2019 it is estimated that approximately 10% of Medicare beneficiaries will have incomes above the threshold.[6] If higher premiums were applied to Medicare beneficiaries with the top 10% of income today, it would affect people earning approximately $63,000.[7]

Proposals to increase the share of Part B expenses paid in premiums by higher income beneficiaries to between 40% and 90% of such expense, depending upon an individual's income bracket, would further complicate, rather than simplifying, both the payment of premiums and the Medicare program as a whole. There currently are four different income brackets with respect to means testing; under the proposal, there would be nine income brackets.[8]

The proposal would also freeze Part B and Part D income-related premium thresholds until 25% of beneficiaries are subject to these premiums. According to the Kaiser Family Foundation, if such a proposal were implemented today, this would affect individuals with income equivalent to $47,000 and couples with $94,000.[9] In other words, individuals earning only about half of the current income threshold of $85,000 would be impacted by such a proposal. This is an income level, we note, that is substantially lower than the thresholds often used to define "higher-income individuals" in other policy discussions, including discussions about tax policy.

Our organizations are opposed to further income-relating Medicare premiums. Medicare remains an immensely popular program, but these proposals undermine the integrity and universality of the Medicare program. Additional means testing would only further undermine the social insurance nature of Medicare and could ultimately raise costs for middle and lower-income individuals who rely on it. As noted by the Kaiser Family Foundation, "there is a possibility that proposals [to further means test Medicare] could lead some higher-income beneficiaries to drop out of Medicare Part B and self-insure, which could result in higher premiums for all others who remain on Medicare…"[10]

[1] See, e.g., a study in the New England Journal of Medicine which found that increasing copays on ambulatory care decreased outpatient visits, leading to increased acute care and hospitalizations, worse outcomes and greater expense. Trivedi, Amal N., Husein Moloo and Vincent Mor, "Increased Ambulatory Copayments and Hospitalizations among the Elderly," New England Journal of Medicine, January 2010. Also see, e.g., the Urban Institute's Health Policy Center finding that home health copays "…would fall on the home health users with the highest Medicare expenses and the worst health status, who appear to be using home health in lieu of more expensive nursing facility stays." Urban Institute Health Policy Center, "A Preliminary Examination of Key Differences in Medicare Savings Bills," July 13, 1997.[2] Such episodic payment caps would disproportionately harm individuals with chronic conditions, including people with conditions such as traumatic brain and spinal cord injuries, Alzheimer's, Parkinson's disease, MS, and other such illnesses and disabilities. This is contrary to the recently settled national class action lawsuit, Jimmo vs. Sebelius. No. 5:11-CV-17 (D. VT, October 16, 2012). Further, such payment caps would thwart current broad efforts aimed at favoring community-based living as opposed to institutionalization of individuals.[3] For an analysis of the potential impact of a combined Part A/B deductible, see, e.g., our previously submitted joint testimony to this subcommittee regarding its February 26, 2013 hearing entitled "Examining Traditional Medicare's Benefit Design." This testimony is available at each of our websites, including: http://cahealthadvocates.org/_pdf/advocacy/2013/Medicare_Redesign_Testimony_CHA_CMA_MR_20022513.pdf.[4] See, e.g., Kaiser Family Foundation, "Restructuring Medicare's Benefit Design: Implications for Beneficiaries and Spending" (November 2011) available at: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8256.pdf.[5] According to the Kaiser Family Foundation, in 2012, 5.1% of Part B enrollees (2.4 million beneficiaries) to pay the income-related Part B premiums were estimated to pay the income-related premium. See "Income-Relating Medicare Part B and Part D Premiums Under Current Law and Recent Proposals: What are the Implications for Beneficiaries?" Kaiser Family Foundation, February 2012, available at: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8276.pdf.[6] The share of Medicare beneficiaries required to pay the income-related Part B premium is projected to rise to 9.7% in 2019 (5.5 million beneficiaries). Once income thresholds begin to rise with inflation again in 2020, this number is projected to fall back to 6.6% of beneficiaries. See "Income-Relating Medicare Part B and Part D Premiums Under Current Law and Recent Proposals: What are the Implications for Beneficiaries?" Kaiser Family Foundation, February 2012, available at: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8276.pdf.[7] According to Urban Institute/Kaiser Family Foundation analysis in 2011, the 90th percentile of income among Medicare beneficiaries in 2010 was $63,251. See "Projecting Income and Assets: What Might the Future Hold for the Next Generation of Medicare Beneficiaries?" Kaiser Family Foundation, June 2011, available at: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8172.pdf.[8] "AP Newsbreak: Medicare Means Test Plan Detailed" by Ricardo Alonso-Zaldivar, Associated Press, April 12, 2013.[9] "Income-Relating Medicare Part B and Part D Premiums Under Current Law and Recent Proposals: What are the Implications for Beneficiaries?" Kaiser Family Foundation, February 2012, available at: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8276.pdf.[10] "Income-Relating Medicare Part B and Part D Premiums Under Current Law and Recent Proposals: What are the Implications for Beneficiaries?" Kaiser Family Foundation, February 2012, available at: http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8276.pdf.